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Denmark's Genius Housing Fix

businessinsider.com

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Re: Denmark's Genius Housing Fix

#31

Post by erehweb »

bryanlarsen wrote: post #17
klipt wrote: post #14

Earlier quoted context omitted.

Because the real cause of high housing prices is too little housing supply (relative to demand). This "genius fix" does nothing to help that. The solution is to Build. More. Housing.

There are literally dozens of causes for high housing prices. Any one fix is not enough. For example, the Ontario Housing Task Force had 55 recommendations, and that's only for the issues of provincial responsibility.

Here's the recommendations - https://www.ontario.ca/page/housing-affordability-task-force...

#1 is Set a goal of building 1.5 million new homes in ten years. #2 is ... set “growth in the full spectrum of housing supply” ... as the most important residential housing priorities... #3 is ... Allow “as of right” residential housing up to four units and up to four storeys on a single residential lot. ...

etc.

So a lot of these boil down to build more houses / let people build more houses.

Re: Denmark's Genius Housing Fix

#32

Post by bryanlarsen »

marcinzm wrote: post #21
bryanlarsen wrote: post #11

Earlier quoted context omitted.

Most countries outside of the US also have a "fix" for this specific problem just by not having 30 year fixed rate mortgages. For example in Canada most fixed rate mortgages are only fixed for 5 years. So we don't have the mortgage lock in effect that the US has, but that's only one cause out of dozens for outrageous housing prices.

As I understand it, the Canada housing market is significantly more broken than the US one overall: https://awealthofcommonsense.com/2023/09/the-u-s-housing-mar... Also, isn't there now a massive concern about large scale loan defaults and bankruptcies the next time mortgage rates reset in Canada?

Structurally, the Canadian housing market is much less broken than the US, IMO. Toronto and Vancouver are adding housing at rates unparalleled in any US city outside of Texas.

But Canada also has population growth ~10X that of the US.

Re: Denmark's Genius Housing Fix

#33

Post by ErikBjare »

barrenko wrote: post #20
xkbarkar wrote: post #8

Earlier quoted context omitted.

In Denmark, with a realkredit loan. The loan is funded by bonds that investors buy. The realkredit institution manages these loans and makes sure the investors get paid back. The refinancing part is essentially if the interest rates go up I can ask to pay those higher interest and bit more per month and then my total mortgage debt goes down. In some cases you can save a lot of money by doing that. It depends. Also mo…

Can a foreigner buy these 'realkredits'?

Yes, but I'm not sure why you would.

Re: Denmark's Genius Housing Fix

#34

Post by mcntsh »

bryanlarsen wrote: post #11
baal80spam wrote: post #10

My DK friends say that housing prices in København are outrageous. Did the genius fix work only locally?

Most countries outside of the US also have a "fix" for this specific problem just by not having 30 year fixed rate mortgages. For example in Canada most fixed rate mortgages are only fixed for 5 years. So we don't have the mortgage lock in effect that the US has, but that's only one cause out of dozens for outrageous housing prices.

Did you know that the US has one of the best income-to-housing-price ratios in the world?

Re: Denmark's Genius Housing Fix

#36

Post by marcinzm »

brabel wrote: post #30
bryanlarsen wrote: post #11

Earlier quoted context omitted.

Most countries outside of the US also have a "fix" for this specific problem just by not having 30 year fixed rate mortgages. For example in Canada most fixed rate mortgages are only fixed for 5 years. So we don't have the mortgage lock in effect that the US has, but that's only one cause out of dozens for outrageous housing prices.

You guys have 30 year fixed rate mortgages???? How the hell can that work? How can banks predict with any accuracy the interest rates for that kind of period? I had a 3-year fixed rate mortgage some 5 years ago, fixed at the rate of the time which was historically extremely low (below 2% pa), before the interest rates skyrocketed, and was really happy :D I had a couple of years on those rates... but then I went to re…

At the bottom of the rate curve a few years ago a 30 year fixed rate was 2.8%, a 5/1 adjustable rate was 2.5%, and a 15 year fixed was 2.1%.

Re: Denmark's Genius Housing Fix

#37

Post by dmoy »

CookiesOnMyDesk wrote: post #15
okeuro49 wrote: post #3

Earlier quoted context omitted.

> The latter option is valuable because when interest rates rise, the price of mortgages fall. Can you explain how that works under this system?

He means that the price of the bonds backing the mortgage fall. Since the bonds are fixed interest, when interest rates rise, new bonds at a higher interest rate are more profitable than the old bonds at a lower interest rate. As such the free market price of the old bonds will drop to until the selling-at-a-loss reaches an equilibrium with the expected increased profit from higher interest rates of the new bonds ove…

Yup exactly this. If you go to "normal" bonds, there's many articles describing the idea, e.g. https://www.schwab.com/learn/story/what-happens-to-bonds-whe...

But basically:

Say a bond was originally worth say $100 and generated $10 of income in time T (10%). If interest rates rise so that $100 will now generate $20 (20%), then the original bond is worth less to a buyer. If we ignore the time delta, that bond would only really be worth $50 ($50 to generate $10 is the same 20%), so it's half as valuable. (The time change would bring it somewhere in between, depending on how long has elapsed).

Re: Denmark's Genius Housing Fix

#38

Post by apercu »

babypuncher wrote: post #23
bryanlarsen wrote: post #11

Earlier quoted context omitted.

Most countries outside of the US also have a "fix" for this specific problem just by not having 30 year fixed rate mortgages. For example in Canada most fixed rate mortgages are only fixed for 5 years. So we don't have the mortgage lock in effect that the US has, but that's only one cause out of dozens for outrageous housing prices.

Thank fuck my mortgage rate is locked in. I refinanced when rates were at rock bottom, I'd hate to see what my mortgage payment would look like today if my bank was allowed to raise it.

That's the Canadian system, have to renew your rate every 5 years. It's great for the banks. The tighter regulations helped Canada avoid the underwater mortgage fiasco of the US in 2008/2009, but mostly it's just a really good deal for the banks. :)

Re: Denmark's Genius Housing Fix

#39

Post by selectodude »

brabel wrote: post #30
bryanlarsen wrote: post #11

Earlier quoted context omitted.

Most countries outside of the US also have a "fix" for this specific problem just by not having 30 year fixed rate mortgages. For example in Canada most fixed rate mortgages are only fixed for 5 years. So we don't have the mortgage lock in effect that the US has, but that's only one cause out of dozens for outrageous housing prices.

You guys have 30 year fixed rate mortgages???? How the hell can that work? How can banks predict with any accuracy the interest rates for that kind of period? I had a 3-year fixed rate mortgage some 5 years ago, fixed at the rate of the time which was historically extremely low (below 2% pa), before the interest rates skyrocketed, and was really happy :D I had a couple of years on those rates... but then I went to re…

The federal government buys a significant percentage of these loans and eats the interest rate risk. It’s a direct subsidy.
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